How HAMP modifications are escalated
After publishing my post this morning about the way disputes are resolved in HAMP, I went back and forth with Treasury a few times. And it turns out that there’s much more to it than the Homeownership Preservation Foundation — although finding out exactly how it all works is basically impossible unless you know someone at Treasury. Transparent this is not.
As far as I can make out, HPF runs something called the HOPE Hotline. The hotline then passes callers through to counselors who are not HPF employees, but rather employees of counseling organizations, all operating under the rubric of MHA Help. The counselors often work together with the homeowner when dealing with the servicer.
If MHA Help gets nowhere with the servicer, the case can be escalated one more level to something called the HAMP Solution Center, or HSC. You don’t need to be MHA Help to escalate to HSC: government offices can do it too and sometimes other third parties acting on behalf of the homeowner.
Here’s where things start getting a bit surreal, though. According to a 24-page MHA Supplemental Directive from November, an Escalated Case is just given back to the servicer to be decided all over again — essentially, it’s escalated all the way back to the very entity which was being complained about in the first place. The servicer is required, under MHA rules, to have lots of ducks in a row when it makes the decision on the escalated case and it needs to make its decision within 25 days. But it’s still up to the servicer to make the decision. And once the servicer has made that decision, the escalated case is considered resolved.
Which helps to put this chart in context:
The chart comes from this document and shows the amount of time that servicers actually take to resolve an escalated case. None of the privately-owned servicers (GMAC is state-owned) seem to be able to hit the 25-day requirement, with BofA being particularly bad. And the crazy thing is that these are all cases that the servicers have already made a decision on. If they were remotely competent, they should just be able to revisit their existing paperwork and check to see that the decision made sense.
Effective February 1, it’s going to get a bit tougher for servicers: they’re going to have to provide the escalations staff with information relevant to the case at hand, like the numbers they’re using for debt and income and the correspondence they’ve received from the the borrower. Expect the numbers in the chart to start rising at that point.
But for the time being, the only check on the servicers is coming from Treasury’s compliance agents — who happen to be a group within Freddie Mac called “Making Home Affordable-Compliance” or MHA-C. The next compliance report is being released on Wednesday; the last one is here. (See slide 11.) MHA-C doesn’t look at every escalated case; instead it looks at a sample of 100 cases and does a “second look review”. Sometimes it agrees with the servicer’s decision, sometimes it disagrees and sometimes it can’t make up its mind:
Wells Fargo stands out here as being particularly bad, although the bank conspicuous by its absence is Bank of America. We’ll see how they do when the new report comes out; they got a pass on this one because they were too busy engaging in “other compliance activities” to do the second look reviews there.
As far as I can make out, the only time that an impartial third party will ever arbitrate a loan-mod decision is if you’re lucky enough to be picked as one of the sample of 100 in the MHA-C review. In that case, if MHA-C disagrees with the servicer, the servicer basically has to go back and do it again, until MHA-C is satisfied; in the meantime, it can’t foreclose on the property.
But the overwhelming majority of homeowners looking for a loan modification will never come anywhere near an MHA-C review. Indeed, more than 29,000 homeowners have been stuck in their “trial” modification programs for over a year, even though the trials aren’t supposed to last for more than three months.
The whole thing is a mess, and it’s incredibly opaque: there’s no website explaining how it all works in plain English, with the aim of guiding people through the escalation process. But with Treasury seemingly happy to let the servicers make all the decisions, and even staff the board of the main helpline, it’s hardly a surprise that the HAMP process has been so very frustrating for so many people.